Oriflame sales up but costs and currency exchange hits profits

By Simon Pitman

- Last updated on GMT

Related tags: Local currency sales, United states dollar, Euro

Direct sales player Oriflame has announced a big increase in local sales for its second quarter, but the negative impact of currency exchange hits profits.

Sales for the quarter were up 15 per cent in local currency, but only 2 per cent in euro terms, to reach €315.5m, compared to €308.7m in the corresponding quarter last year.

Increased costs, mainly due to a larger workforce and restructuring, combined with the negative impact of currencies to see profits for the quarter tumble by 31 per cent to €22.5m.

Cost of bigger workforce hits bottom line

CEO Magnus Brannstrom underlined the fact that a record workforce of 3.4 million sales consultants had helped to increase sales, at the same time as affecting productivity levels.

The company stated that it had been concentrating on value added product lines during the second quarter, tapping into the fact that many consumers are down trading because of the economic situation.

The strongest performing categories during the quarter were personal and hair care, which was boosted by the launch of the Hair X range, together with fragrance and accessories, which was boosted by high trade in men’s fragrances thanks to the launch of Dima Bilan.

Currency translations hurt

Sales for the first six months of the year were up 18 per cent in local currency and 4 per cent in euro currency to reach €656.8m, compared to €630.5m in the corresponding quarter last year, while net profit for the period fell 34 per cent to €46.8m.

On a regional basis second quarter sales in the CIS and Baltics market grew by 19 per cent in local currencies during the second quarter, while in the EMEA region local currency sales grew by 9 per cent.

However, the gains in these two markets were almost totally wiped out in the quarter by unfavourable currency translations, with the CIS & Baltic market euro sales falling by 1 per cent to €168.5m and the EMEA market euro sales rising 1 per cent to €98.3m.

Currency translations in the Latin America and Asia market were more positive, with Latin America showing local currency gains of 13 per cent and euro currency gains 8 per cent to reach €16.2m, while Asia local currency sales increased 39 per cent and 42 per cent in euro currency, to €27.2m.

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